Micro Notes 11+12

Question 1

Given naturally, not a coincidence
Everyone has some natural gift, but not all pay off in the market
Rare gifts that yield increases in demand in product markets and small factor markets with low substitution possibilities are more valuable
Payoff is not guaranteed

Answer 1

naturally occurring market power

Question 2

Size of the process of production
Increase in this leads to an increase in all factor outputs in the same proportion to expansion of production
Returns to scale- degree to which a change in the scale of production changes the level of output (decreasing, constant, increasing)
Increasing returns to scale lead to scale economies
Scale economies create market power and few can break into the market to compete

Answer 2

scale of production

Question 3

man-made or not naturally occurring

Answer 3

artificially created market power

Question 4

not natural, comes from the government; marketable commodity that can be bought up

Answer 4

patent

Question 5

sustaining a return to power

Answer 5

rent maintenance

Question 6

preventing a loss in market power

Answer 6

rent-seeking

Question 7

socialization can limit competition (e.g. race, gender)

Answer 7

social institutions

Question 8

when a market does not work smoothly and quickly to what needs to be done

Answer 8

market failure

Question 9

non-partitionable and non-excludable goods; free-riding can cause failure

Answer 9

pure public goods

Question 10

property rights rae either not assigned or enforceable (e.g. air, water) and no market forms

Answer 10

externalities

Question 11

activity that imposes negative effects (e.g. pollution); market failure results from a private actor not taking all costs into effect

Answer 11

negative externalities

Question 12

activity increases positive effect

Answer 12

positive externalities

Question 13

possible negative impact for some associated with a risk (e.g. drunk driving, genetic engineering)

Answer 13

risk externality

Question 14

the phase of the business cycle during which output is increasing

Answer 14

expansion

Question 15

the phase of the business cycle during which output is falling

Answer 15

recession

Question 16

a deep and prolonged recession

Answer 16

depression

Question 17

turning point in the business cycle between recession and expansion

Answer 17

trough

Question 18

turning point in the business cycle between expansion and recession

Answer 18

peak

Question 19

when GDP begins to increase after a contraction ad a trough in the business cycle

Answer 19

recovery